Julia Hazen

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September 05, 2007

Goodbye Dar-es-Salaam

Hello Blog Readers,
Much time has passed since my last substantial blog entry and I have returned to the States just a few days ago. My last weeks in Dar were bittersweet. Saying good bye to my friends and leaving the city that has come to feel like home was very hard but I am excited about the challenges that my last year at Brown hold.
I’d like to share with you a very exciting piece of news I just received. Ukombozi, the woodcarvers co-operative that I co-founded, has reached one of its primary objectives. The 13 artists of the group have saved enough money to rent their own store in the crafts market at Mwenge. They have taken a significant step towards economic independence and breaking out of poverty. They can now control the prices they receive for various carvings and have much greater control over production and sales than before and the most critical aspect is that now the co-operative will get the profit gained from their own sculptures. Getting their own stores was one of the original objectives and we succeeded far earlier (in one year) than any of us thought possible. We will continue our exports business and we are importing 240 sculptures right now and will try to sell them in the busy pre-holidays season. Thank you to everyone who has supported Ukombozi in the last year and helped the artists to achieve this critical success.
My work at FINCA also wrapped up very well. My colleagues and I presented our market research findings to the three Dar branch managers and the department heads of FINCA Tanzania headquarters. Our findings pertained to both FINCA’s operations and its geographical coverage. One of the most interesting things we did was to compare data on the concentration of FINCA clients and data on the number of businesses in a given area. This allowed us to identify areas in which clients were disproportionately located and areas in which there seemed to be a discrepancy between the number of borrowers and the number of businesses, which is potentially an under-served area. We then went to those areas to investigate the causes of the discrepancy. Our presentation served as a launching pad for a really productive discussion on strategy and the creation of a concrete action plan for working to implement some of our team’s suggestions and take advantage of the opportunities for growth that the team identified.
The market research team will continue to use the methods we developed for market research as they investigate a significant number of cities and regions in which FINCA has yet to build a branch. I am in fact pretty sad that I won’t be able to go with them on a very cool opportunity for travel.
Needless to say most of the findings are confidential for FINCA Tanzania staff (it is a competitive industry after all!), but one persistent theme I was captivated by was the trade-off between working to serve the very poorest micro entrepreneurs at the risk of losing profit and operational self-sufficiency and serving the “not so poor” business people who are a much less risky and more profitable investment. This trade-off is in play both within each branch and within the country. While formulating our suggestions, our team was conflicted between recommending very poor, very remote or very under-developed neighborhoods with poor business prospects and prosperous areas in which business was booming and there were many successful entrepreneurs. The same applies to identifying new cities and regions for expansion. Some of the cities on the research list are very remote and notoriously poor while a good deal of the cities are very prosperous, blessed with good industry and infrastructure (and the cash cow that is tourism).
A common criticism of microfinance is that it fails to serve the very poorest which in some ways is pretty intuitive. Microfinance is a market-driven and competitive industry and so it makes sense that MFIs will follow the most profitable and least risky opportunities in the name of working to become independent from donor money and other sources of lending. However, the original vision of microfinance was designed to cater to the poor, offering credit to people who couldn’t access it any other way, which is an argument against courting the “not so poor.” The lingering questions remain, “Who really ‘needs’ micro-credit? Is microfinance even effective in combating the myriad of challenges that the “poorest” face in their daily lives? Is it ‘okay’ if MFIs follow the logical market imperatives that lead them to serve the ‘not so poor’? Don’t the ‘not so poor’ arguably need micro-credit as much as their poorer counterparts if not more so given their greater ability to change capital into increased profit?”
Many of our findings challenged classical microfinance orthodoxy (think old-school Grameen). For example, in Dar-es-Salaam where the cost of living (and purchasing power) are exponentially higher than the rest of the country, many entrepreneurs capital needs exceed “micro” loans, challenging the orthodoxy that giving someone $50 dollars will allow them to “completely change their lives for the better.” For most businesses larger than the humblest market stalls, the owners need anywhere from a few hundred to a few thousand dollars. In Dar-es-Salaam in 2007, cell phones, home appliances, and other electronics are hot commodities with demand growing rapidly. Selling these more expensive items requires a much larger loan than selling fruit in a market or pastries on the street. Even someone who sells ‘mitumba’ (used clothes) buys a bale of 45 kg from Asia for around 200 dollars and he buys a few each week and therefore needs a much bigger loan than classical MFI models permitted. One can obviously argue that perhaps these bigger entrepreneurs don’t need loans as much as truly micro-entrepreneurs. However, given the number of challenges their businesses in face, additional capital can help to insulate these business owners against some of these obstacles and prevent them from sliding into deeper poverty. FT’s individual lending programs are catered to these “small” business owners and responds to both their greater capital needs.
FINCA Tanzania seems to be doing a really great job at responding to the shifting market demands by offering individual loans of much larger sums (up to almost $10,000 dollars), incorporating men into their lending programs, and working to make their programs more flexible and responsive to business owners’ needs.
On a more personal note, I enjoyed my time working for FINCA Tanzania immensely. My boss, Robert, taught me a lot about micro-finance and about the inner workings of FINCA. Also, my co-workers, Flora and Silas, were really amazing and I was glad to have had the opportunity to work with them so closely in our often crazy voyages to the far-flung corners of the city. I have only been back for a few days but I already miss Tanzania and all my friends there. Thanks to everyone who read my blog and I hope it has piqued your interest in microfinance and Tanzania. Asanteni wote wanaosoma blog yangu. Kwa herini!

Posted by Julia Hazen at September 5, 2007 09:51 PM

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Posted by: Donna Davis at September 6, 2007 06:45 AM